Ironwood Completes $175 Million Debt Offering

January 04, 2013 10:02 AM Eastern Time

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Ironwood
Pharmaceuticals, Inc. (NASDAQ: IRWD) today announced the completion
of a debt offering of $175 million. Ironwood intends to use the net
proceeds from this transaction to fund its research and development
efforts and to support the commercial launch of LINZESS™ (linaclotide),
in addition to general corporate purposes.

“The structure of this financing provides us with
financial flexibility as we continue working toward our goal of building
an enduring pharmaceutical company that helps people lead better lives.”

Ironwood issued $175 million in aggregate principal amount of
Linaclotide PhaRMASM 11% Notes due on or before June 15,
2024. The notes bear an annual interest rate of 11%, with interest paid
quarterly beginning June 15, 2013, and principal expected to be paid
quarterly beginning March 15, 2014. After the interest-only period,
Ironwood will make quarterly payments on the notes equal to the greater
of (i) 7.5% of net sales of LINZESS in the United States for the
preceding quarter (“the synthetic royalty amount”) and (ii) accrued and
unpaid interest on the notes (“the required interest amount”). Principal
on the notes will be repaid in an amount equal to the synthetic royalty
amount minus the required quarterly interest amount, when this is a
positive number, until the principal has been paid in full. Given the
principal payments on the notes are based on the synthetic royalty
amount, which will vary from quarter to quarter, the notes may fully be
repaid prior to the final maturity date in 2024.

The notes are solely secured by a security interest in a segregated bank
account established to receive the required interest amount (during the
interest-only period) or the synthetic royalty amount (after the
interest-only period), and all amounts credited from time to time to
this account. The notes are not convertible into Ironwood equity. The
notes may be redeemed at any time prior to maturity, in whole or in
part, at the option of Ironwood at specified redemption premiums.

“This non-dilutive financing enhances our cash position and provides us
with additional strategic optionality as we continue to advance our
broader pipeline and execute on the launch of LINZESS,” said Michael
Higgins, Chief Financial Officer and Chief Operating Officer of Ironwood
Pharmaceuticals. “The structure of this financing provides us with
financial flexibility as we continue working toward our goal of building
an enduring pharmaceutical company that helps people lead better lives.”

Prior to the completion of this transaction, Ironwood ended 2012 with
approximately $168 million of cash, cash equivalents, and
available-for-sale securities.

The notes have not been and will not be registered under the Securities
Act of 1933, as amended, and may not be offered or sold in the United
States absent an applicable exemption from the registration requirements
of the Securities Act.

Morgan Stanley acted as sole placement agent for the notes.

About LINZESS

LINZESS is the first and only guanylate cyclase-C (GC-C) agonist
approved by the FDA for the treatment of both irritable bowel syndrome
with constipation (IBS-C) and chronic idiopathic constipation (CIC) in
adults. LINZESS is a once-daily capsule that helps relieve the abdominal
pain and constipation associated with IBS-C, as well as the
constipation, infrequent stools, hard stools and incomplete evacuation
associated with CIC. The recommended dose is 290 mcg for IBS-C patients
and 145 mcg for CIC patients. LINZESS should be taken at least 30
minutes before the first meal of the day.

LINZESS is thought to work in two ways based on nonclinical studies.
LINZESS binds to the GC-C receptor locally, within the intestinal
epithelium. Activation of GC-C results in increased intestinal fluid
secretion and transit and a reduction in visceral pain, which is thought
to be mediated by decreased activity of pain-sensing nerves. The
clinical relevance of the effect on pain fibers in nonclinical studies
has not been established.

In placebo-controlled Phase III clinical trials of more than 2,800
adults, LINZESS was shown to reduce abdominal pain in IBS-C patients and
increase bowel movement frequency in both IBS-C patients and CIC
patients. Improvement in abdominal pain and constipation occurred in the
first week of treatment and was maintained throughout the 12-week
treatment period. Maximum effect on abdominal pain was seen at weeks 6-9
and maximum effect on constipation occurred during the first week. When
a subset of LINZESS-treated patients in the trials were switched to
placebo, they reported their symptoms returned toward pretreatment
levels within one week, while placebo-treated patients switched to
LINZESS reported symptom improvements. LINZESS is contraindicated in
pediatric patients up to 6 years of age. The use of LINZESS in pediatric
patients 6 through 17 years of age should be avoided. In nonclinical
studies, administration of a single, clinically relevant adult oral dose
of linaclotide caused deaths in young juvenile mice. LINZESS has not
been studied in pediatric patients. In adults with IBS-C or CIC treated
with LINZESS, the most commonly reported adverse event was diarrhea.

Ironwood and Forest Laboratories, Inc. are co-promoting LINZESS in the
United States. Linaclotide was also approved by the European Commission
for the treatment of adults in the European Union with IBS-C and will be
marketed under the brand name Constella® through a license
agreement between Ironwood and Almirall, S.A. Ironwood also has
partnered linaclotide with Astellas Pharma Inc. for development and
commercialization in Japan and certain other Asian countries and with
AstraZeneca for development and commercialization in China.

About Ironwood Pharmaceuticals

Ironwood Pharmaceuticals (NASDAQ: IRWD) is an entrepreneurial
pharmaceutical company dedicated to the art and science of great
drugmaking. Ironwood is located in Cambridge, Mass. To learn more, visit www.ironwoodpharma.com.

Important Safety Information

WARNING: PEDIATRIC RISK

LINZESS is contraindicated in pediatric patients up to 6 years of
age. Use should be avoided in pediatric patients 6 through 17 years of
age. In nonclinical studies, administration of a single, clinically
relevant adult oral dose of linaclotide caused deaths in young juvenile
mice.

Contraindications

LINZESS is contraindicated in pediatric patients up to 6 years of age.

LINZESS is contraindicated in patients with known or suspected
mechanical gastrointestinal obstruction.

Warnings and Precautions

Pediatric Risk

LINZESS is contraindicated in pediatric patients up to 6 years of age.
In nonclinical studies, deaths occurred within 24 hours in young
juvenile mice (1 to 3 week-old mice; approximately equivalent to human
pediatric patients less than 2 years of age) following administration
of one or two daily oral doses of linaclotide.

Use of LINZESS should be avoided in pediatric patients 6 through 17
years of age. Linaclotide did not cause deaths in older juvenile mice
(approximately equivalent to humans age 12 to 17 years). Although
there were no deaths in older juvenile mice, given the deaths in young
juvenile mice and the lack of clinical safety and efficacy data in
pediatric patients, use of LINZESS should be avoided in pediatric
patients 6 through 17 years of age.

Diarrhea

Diarrhea was the most common adverse reaction of LINZESS-treated
patients in the pooled IBS-C and CIC double-blind placebo-controlled
trials. Severe diarrhea was reported in 2% of LINZESS-treated
patients. The incidence of diarrhea was similar in the IBS-C and CIC
populations.

Patients should be instructed to stop LINZESS if severe diarrhea
occurs and to contact their healthcare provider, who should consider
dose suspension.

No drug-drug interaction studies have been conducted with LINZESS.
Linaclotide and its active metabolite are not measurable in plasma
following administration of the recommended clinical doses; hence, no
systemic drug-drug interactions or drug interactions mediated by plasma
protein binding of linaclotide or its metabolite are anticipated.

Linaclotide does not interact with the cytochrome P450 enzyme system
based on the results of in vitro studies. In addition, linaclotide is
neither a substrate nor an inhibitor of the efflux transporter
P-glycoprotein (P-gp).

This press release contains forward looking statements. Investors are
cautioned not to place undue reliance on these forward‐looking
statements, including, but not limited to, Ironwood’s obligations and
ability to pay the required interest and principal payment on the notes
as they become due, the possibility that Ironwood may pay all
outstanding principal and interest on the notes prior to final legal
maturity (including through an early redemption), the intended use of
the proceeds from the offering, Ironwood’s desire to execute on its
pipeline and its goal to build an enduring pharmaceutical company,the
potential for Ironwood to receive milestone or royalty payments related
to linaclotide development and commercialization outside of the United
States, and the anticipated launch of Constella in the European Union by
Almirall.Each forward‐looking statement is subject to risks and
uncertainties that could cause actual results to differ materially from
those expressed or implied in such statement. Applicable risks and
uncertainties include the risks that the commercial launch of LINZESS in
the U.S. is not executed as anticipated, Ironwood or its partners are
unable to manufacture or distribute a sufficient commercial supply of
LINZESS, net sales of LINZESS in the United States are greater or lesser
than anticipated, adoption of LINZESS by physicians or patients is
faster or slower than anticipated, serious adverse events arise in
patients that are deemed to be definitely or probably related to
linaclotide treatment, the incidence or severity of diarrhea in patients
treated with linaclotide is higher than expected, or advancements in
Ironwood’s development pipeline do not proceed as expected, as well as
risks related to the difficulty of predicting regulatory approvals and
the acceptance of and demand for new pharmaceutical products. Applicable
risks also include those that are listed in Ironwood’s Quarterly Report
on Form 10‐Q for the quarter ended September 30, 2012, in addition to
the risk factors that are listed from time to time in Ironwood’s Annual
Reports on Form 10‐K, Quarterly Reports on Form 10‐Q and any subsequent
SEC filings. Ironwood undertakes no obligation to update these
forward‐looking statements to reflect events or circumstances occurring
after this press release. These forward‐looking statements speak only as
of the date of this press release. All forward‐looking statements are
qualified in their entirety by this cautionary statement.